Final- International Business

Which of the following is an example of a greenfield investment? A. A Chinese sugar maker setting up a sugar crushing facility in Cuba. B. A Serbian automobile company purchasing a Croatian component manufacturer. C. A Finnish mobile phone manufacturer expanding its production facility in Finland. D. An Indian oil exploration company acquiring an oil refining company.

A. A Chinese sugar maker setting up a sugar crushing facility in Cuba.

Which of the following is a way in which governments increase the attractiveness of FDI and licensing relative to exporting? A. By implementing import quotas B. By imposing FDI limits in industries C. By increasing tax rates D. By limiting free flow of capital

A. By implementing import quotas

Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. A. Internalization theory B. Product life-cycle theory C. Perfect markets theory D. Random walk theory

A. Internalization theory

Which of the following is a first-mover advantage? A. International firms may gain experience in that country's business practices. B. An international firm can reap the rewards of growth in a new market without incurring the risks. C. A firm may have the opportunity to be the first to introduce generic brands to a market. D. A firm can gauge how well their product will do in the market without taking the risk of investing their.

A. International firms may gain experience in that country's business practices.

Which control system is most widely used by small firms? A. Personal B. Output C. Bureaucratic D. Cultural

A. Personal

_____ is a type of control that tends to be most widely used in small firms. A. Personal control B. Output control C. Bureaucratic control D. Cultural control

A. Personal control

Which of the following helps in adjusting GNI such that it accounts for the differences in the cost of living? A. Purchasing power parity (PPP) adjustment B. Human Development Index C. Debt to GNI ratio D. Consumer Price Index

A. Purchasing power parity (PPP) adjustment

Which of these statements pertaining to cross-border FDI flows is true? A. There was a growth of FDI between 2004 and 2007. B. A slump in FDI from 1998 to 2000 was followed by a surge from 2001 to 2003. C. Among developing nations, the largest recipient of FDI has been Russia. D. The dramatic increase in FDI reflects the decreasing internationalization of business corporations.

A. There was a growth of FDI between 2004 and 2007.

In Firm A, each division is a self-contained, largely autonomous entity with full responsibility for its own value creation activities. What type of structure does Firm A employ? A. Worldwide product division structure B. Global matrix structure C. Worldwide area structure D. Knowledge network structure

A. Worldwide product division structure

the political economy of many of the world's nation-states has changed radically since the late 1980s. Which of the following is a trend that has been evident? A. a wave of democratic revolutions has swept the world. B. totalitarian governments have arisen, replacing democratically elected governments. C. there has been a strong move toward centrally planned economies and away from free market economic models. D. mixed economies are fast replacing market economies.

A. a wave of democratic revolutions has swept the world.

A Japanese car manufacturer acquires an Italian producer of car tires. This is an example of a(n) _____. A. acquisition B. absolute advantage C. greenfield investment D. merger

A. acquisition

FDI can benefit the home country's _____ if the foreign subsidiary creates demands for home-country exports of capital equipment, intermediate goods, complementary products, and the like. A. balance of payments B. oligopolistic industry C. current accounts D. licensing endeavors

A. balance of payments

GNI and PPP data are useful because they provide a _____ of economic development. A. dynamic analysis B. cross-sectional view C. static analysis D. global view

A. dynamic analysis

In a(n) _____ society, the welfare of society is best served by letting people pursue their own economic self-interest. A. individualist B. capitalist C. democratic D. totalitarian

A. individualist

The worldwide product division structure: A. is weak in local responsiveness. B. inhibits the realization of location economies. C. inhibits the realization of experience curve economies. D. limits the transfer of core competencies between areas.

A. is weak in local responsiveness.

The term _____ stresses that the political, economic, and legal systems of a country are interdependent. A. political economy B. common law C. socialism D. collectivism

A. political economy

In several Western democracies, the poor performance of state-owned enterprises, because of protection from competition and guaranteed government financial support, led to _____. A. privatization B. nationalization C. liberalization D. socialization of production

A. privatization

A firm that depends more on mass media advertising to communicate the marketing message to potential consumers is using a _____. A. pull strategy B. push strategy C. standardized strategy D. localized strategy

A. pull strategy

According to pragmatic nationalist view, FDI should be allowed so long as: A. the benefits outweigh the costs. B. they do not aggressively court domestic firms. C. the costs outweigh the benefits. D. the MNE does not seek tax breaks or grants.

A. the benefits outweigh the costs.

Systems that emphasize collectivism tend toward _____. A. totalitarianism B. capitalism C. democracy D. privatization

A. totalitarianism

A _____ tends to be adopted by firms that are reasonably diversified and originally had domestic structures based on product divisions. A. worldwide product division structure B. global matrix structure C. worldwide area structure D. performance structure

A. worldwide product division structure

_____ occurs when a firm invests resources in business activities outside its home country. A. Foreign direct investment (FDI) B. Direct international investment (DII) C. International trade (IT) D. Foreign direct production (FDP)

A. Foreign direct investment (FDI)

Who was the author of The Wealth of Nations in which it is stated that an individual who intends his own gain is led by an invisible hand to promote an end that was not part of his intention? A. David Hume B. Adam Smith C. Karl Marx D. John Stuart Mill

B. Adam Smith

The Netherlands exported tulip bulbs to almost every country in the world except Japan. This was because in Japan, customs inspectors insisted on checking every tulip bulb by cutting it vertically down the middle. This is an example of which of the following trade barriers? A. Export restraint B. Administrative trade policies C. Local content requirement D. Ad valorem

B. Administrative trade policies

What type of control system uses a system of rules and procedures that directs the actions of subunits? A. Personal controls B. Bureaucratic controls C. Cultural controls D. Output controls

B. Bureaucratic controls

_____ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. A. Export restraint B. Dumping C. Local content requirement D. Ad valorem

B. Dumping

_____ are the advantages gained by early entrants into a market. A. Early investor advantages B. First-mover advantages C. First-to-market advantages D. Late-mover advantages

B. First-mover advantages

_____ per person figures can be misleading because they don't consider differences in the cost of living. A. Gross domestic product (GDP) B. Gross national income (GNI) C. Purchasing power parity (PPP) D. Human Development Index (HDI)

B. Gross national income (GNI)

Which of the following philosophies can be traced back to the ancient Greek philosopher Aristotle? A. Socialism B. Individualism C. Collectivism D. Anarchism

B. Individualism

_____ seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets. A. Knickerbocker's theory B. Internalization theory C. The noninterventionist theory D. The eclectic paradigm

B. Internalization theory

According to political scientist's thesis is global terrorism a product of the tension between civilizations and the clash of value systems and ideology? A. Amartya Sen B. Samuel Huntington C. Francis Fukuyama D. Hernando de Soto

B. Samuel Huntington

Which of the following statements is true about Samuel Huntington? A. Samuel Huntington argues that there is a universal civilization based on widespread acceptance of Western democratic ideals. B. Samuel Huntington argues that the rise of Islamic fundamentalism is a response to the alienation produced by modernization. C. Samuel Huntington argues that global terrorism is a product of the static nature of traditional values and religious systems. D. Samuel Huntington argues that many societies, by adopting the material paraphernalia of the modern world, are becoming more Western.

B. Samuel Huntington argues that the rise of Islamic fundamentalism is a response to the alienation produced by modernization.

Which political view allows FDI so long as the benefits outweigh the costs? A. The traditional view B. The pragmatic nationalist view C. The radical view D. The free market view

B. The pragmatic nationalist view

Control through a system of rules and procedures that directs the actions of subunits is _____. A. personal control B. bureaucratic control C. output control D. cultural control

B. bureaucratic control

A political system that prioritizes the needs of the society over individual freedoms is called _____. A. totalitarianism B. collectivism C. capitalism D. egalitarianism

B. collectivism

In a(n) _____ economy the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold. A. market B. command C. open economy D. laissez-faire

B. command

In a company using _____, employees tend to control their own behavior, which reduces the need for direct supervision. A. bureaucratic controls B. cultural controls C. personal controls D. output controls

B. cultural controls

Host country citizens that are employed by an MNE following an FDI are an example of a(n) _____ of FDI. A. internality B. direct effect C. externality D. indirect effect

B. direct effect

A market economy encourages innovation because: A. state ownership of enterprises reduces risks of innovation. B. economic freedom leads to greater incentives for innovation. C. government-owned and funded research centers become hubs of innovation. D. the prices of goods and services, including new products, are fixed by government.

B. economic freedom leads to greater incentives for innovation.

In a _____, if demand for a product exceeds supply, prices will rise, signaling to producers to produce more. A. mixed economy B. market economy C. collectivist economy D. command economy

B. market economy

Central to the concept of economies of scale is the idea that the best way to achieve high efficiency, and hence low unit costs, is through the: A. customization of products for each individual market. B. mass production of a standardized output. C. production of goods that are different from each other. D. production of small volumes of high-quality products.

B. mass production of a standardized output.

When a company charges whatever the market will bear, the company is using _____. A. strategic pricing B. price discrimination C. a push strategy D. a pull strategy

B. price discrimination

When a firm emphasizes personal selling rather than mass media advertising in the promotional mix, the firm is using a _____. A. standardized strategy B. pull strategy C. push strategy D. localized strategy

B. pull strategy

A(n) _____ helps domestic producers to compete against foreign imports. A. ad valorem tariff B. specific tariff C. import quota D. subsidy

B. specific tariff

An advantage of buying component parts, or even an entire product, from independent suppliers is that: A. it can make planning, coordination, and scheduling of adjacent processes easier for the firm. B. the firm can maintain its flexibility by switching orders according to circumstances. C. the firm will be able to maintain strict control over its proprietary technology. D. the firm will have access to superior quality raw materials and will deliver high quality products.

B. the firm can maintain its flexibility by switching orders according to circumstances.

Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by globalizing their markets. This involves _____. A. regulating markets B. privatizing state-owned enterprises C. decreasing competition D. reducing foreign investment

B. Privatizing state-owned enterprises

Which of the following is a consequence of globalization? A. Decreasing interdependence between national economies B. Increasing outsourcing of services C. Differentiation of material culture D. Increase in barriers to cross-border trade

B. increasing outsourcing of services

Globalization of markets results in markets becoming _____. A. more interdependent B. less diverse C. more protected D. less competitive

B. less diverse

_____ a requirement that some specific fraction of a good be produced domestically. A. Administrative trade policies are B. The Buy American Act is C. A local content requirement is D. Bureaucratic rules are

C. A local content requirement is

_____ gives a firm tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. A. Licensing B. Internalization C. Foreign direct investment D. A merger

C. Foreign direct investment

_____ arise(s) from using resource endowments or assets that are tied to a particular foreign location and that a firm finds valuable to combine with its own unique assets. A. Multipoint competition B. The eclectic paradigm C. Location-specific advantages D. Outflow of FDI

C. Location-specific advantages

Which of the following is a disadvantage of a worldwide area structure? A. Firms that use this structure tend to have a high degree of diversification. B. Decision-making is centralized and subsidiaries cannot customize to local marketing needs. C. The fragmentation of the organization that makes it difficult to realize location and experience curve economies. D. It does not facilitate local responsiveness.

C. The fragmentation of the organization that makes it difficult to realize location and experience curve economies.

Which of the following is a trade barrier that affects a firm's strategy? A. Tariffs lower the cost of exporting. B. Quotas may enhance a firm's ability to serve a country from outside of that country. C. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise. D. The threat of antidumping actions promotes the firm's ability to use aggressive pricing to gain market share in a country.

C. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

Governments use _____ to boost exports and restrict imports. A. subsidies B. local content requirements C. administrative trade policies D. formal instruments of trade policy

C. administrative trade policies

The pragmatic nationalist view highlights _____ of FDI. A. only the benefits B. only the costs C. both the benefits and costs D. neither the benefits nor the costs

C. both the benefits and costs

Administrative trade policies are: A. requirements that some specific fraction of a good be produced domestically. B. quotas on trade imposed by the exporting country. C. bureaucratic rules designed to make it difficult for imports to enter a country. D. designed to punish foreign firms that engage in dumping.

C. bureaucratic rules designed to make it difficult for imports to enter a country.

When _____ is emphasized, an individual's right to do something may be restricted on the grounds that it runs counter to "the good of society." A. individualism B. totalitarianism C. collectivism D. theocracy

C. collectivism

Judges in a(n) _____ have the power to interpret the law so that it applies to the unique circumstances of an individual case. A. civil law system B. international law system D. theocratic law system C. common law system

C. common law system

In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of: A. ad valorem tariff. B. subsidy. C. dumping. D. import quota.

C. dumping.

The need for coordination is high in: A. firms trying to pursue localization strategies. B. international firms. C. firms trying to profit from location and experience curve economies. D. domestic corporations.

C. firms trying to profit from location and experience curve economies.

As transportation costs or trade barriers increase, exporting becomes unprofitable, and the choice is between FDI and _____. A. subsidies B. incentives C. licensing D. resource endowments

C. licensing

According to _____, some specific fraction of a good must be produced domestically. A. import quotas B. voluntary export restraints C. local content requirements D. antidumping duties

C. local content requirements

The economic freedom associated with a _____ creates greater incentives for innovation and entrepreneurship than either a planned or a mixed economy. A. mixed economy B. planned economy C. market economy D. command economy

C. market economy

Strategic trade policy suggests that a government should use _____ to support promising firms that are active in newly emerging industries. A. tariff rate quotas B. quota rents C. subsidies D. ad valorem tariffs

C. subsidies

A pull strategy should be used when: A. the firm is selling industrial products. B. the distribution channels are short. C. the distribution channels are long. D. few print or electronic media are available.

C. the distribution channels are long.

GNI per person figures can be misleading because ____. A. they also include barter agreements B. they provide a dynamic picture of development C. they don't consider differences in the cost of living D. they don't consider exchange rate

C. they don't consider differences in the cost of living

According to the concept of economies of scale, as plant output expands, _____. A. productivity declines B. total costs decrease C. unit costs decrease D. utilization of capital decline

C. unit costs decrease

_____ are the highest rate that can be charged, which is often, but not always, the rate that is charged. A. Ad valorem tariff rates B. Tariff rents C. Specific tariff rates D. Bound tariff rates

D. Bound tariff rates

Licensing would be a good option for firms in which of the following industries? A. High-technology industries in which protecting firm-specific expertise is of paramount importance. B. Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations. C. Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations. D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.

D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.

Which of the following statements about individualism is true? A. Individualism promotes state ownership of the basic means of production, distribution, and exchange. B. Individualism promotes globalization. C. Individualism creates an anti-business environment. D. Individualism advocates for a democratic political system.

D. Individualism advocates for a democratic political system.

Which of the following observations concerning Knickerbocker's theory is true? A. It does not explain imitative FDI behavior by firms in oligopolistic industries. B. Economists favor this theory as an explanation for FDI compared to the internalization theory. C. It addresses the issue of whether FDI is more efficient than exporting or licensing for expanding abroad. D. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license.

D. It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license.

When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments? A. Greenfield investments are characterized by reduced management control. B. Mergers and acquisitions are preferred because most greenfield investments fail. C. It is easier and less risky for a firm to build strategic assets than acquire similar assets. D. Mergers and acquisitions are quicker to execute than greenfield investments.

D. Mergers and acquisitions are quicker to execute than greenfield investments.

ownership troubled firms whose continued operation is thought to be vital to national interests? A. Market economies B. Laissez-faire economies C. Liberal economies D. Mixed economies

D. Mixed economies

_____ is achieved by comparing actual performance against targets and intervening selectively to take corrective action. A. Personal control B. Cultural control C. Bureaucratic control D. Output control

D. Output control

A country rejects FDI proposals in certain industries. It does so because the tangible advantages of such investments are lesser than potential costs like loss of employment and reduction of overall well-being. However, it aggressively pursues inviting foreign investments in sectors like infrastructure, education, and healthcare because of the benefits that accrue with them. Which political view of FDI is discussed in this example? A. The pure market view B. The free market view C. The radical view D. The pragmatic nationalist view

D. The pragmatic nationalist view

Which of the following situations would lead a firm to choose to decentralize production? A. The product serves universal needs. B. The production technology has high fixed costs and high minimum efficient scale relative to global demand or flexible manufacturing technology exists. C. Trade barriers are low. D. The production technology has low fixed costs and low minimum efficient scale, and flexible manufacturing technology is not available.

D. The production technology has low fixed costs and low minimum efficient scale, and flexible manufacturing technology is not available.

In which of the following situations does the internalization theory recommend FDI as opposed to licensing? A. When the firm has know-how that can be adequately protected by a licensing contract B. When the firm produces products that have a low value-to-weight ratio C. When a firm's skills and know-how are amenable to licensing D. When the firm needs tight control over a foreign entity

D. When the firm needs tight control over a foreign entity

The threat of _____ limits the ability of a firm to use aggressive pricing to gain market share in a country. A. specific tariffs B. import quotas C. countervailing duties D. antidumping action

D. antidumping action

Under the _____, cases are judged with reference to three characteristics: tradition, precedent, and custom. A. theocratic law system B. civil law system C. contract law system D. common law system

D. common law system

Plato _____; he believed that society should be stratified into classes, with those best suited to rule. A. equated individualism with equality B. equated collectivism with equality C. promoted representative democracy D. did not equate collectivism with equality

D. did not equate collectivism with equality

A company that sells its product in a foreign market below the cost of production may be accused of _____. A. pandering B. profiteering C. carnivorous behavior D. dumping

D. dumping

The _____ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located. A. product life-cycle theory B. internalization theory C. multipoint competition theory D. eclectic paradigm

D. eclectic paradigm

Sony was a pioneer in the portable music market segment. Sony's Walkman was an innovative product which created a new category altogether and made Sony a technological leader. This gave the company an edge over other consumer electronics brands that introduced portable music players for a very long time. In this example, Sony had the: A. vertical integration advantage. B. purchasing power parity advantage. C. free-rider advantage. D. first-mover advantage.

D. first-mover advantage.

Firms pursuing a global standardization strategy: A. have low performance ambiguity. B. attempt to create value by transferring core competencies from home to foreign subsidiaries. C. are less centralized than enterprises pursuing a localization or international strategy. D. have a high need for coordination and cultural controls.

D. have a high need for coordination and cultural controls.

The tenet of _____ is that the welfare of society is best served by letting people pursue their own economic self-interest. A. socialism B. communism C. anarchism D. individualism

D. individualism

In some countries, the official GNI per capita measured at PPP data does not reflect the actual the total annual income because: A. it doesn't consider differences in the cost of living. B. it gives a static picture of development. C. it fails to include income earned from other countries in the form of dividends. D. large amounts of economic activity may be in the form of barter agreements.

D. large amounts of economic activity may be in the form of barter agreements.

Specific tariffs are: A. levied as a proportion of the value of the imported good. B. government payment to domestic producers. C. in the form of manufacturing or production requirements of goods. D. levied as a fixed charge for each unit of a good imported.

D. levied as a fixed charge for each unit of a good imported.

An economy in which the interaction of supply and demand determines the quantity in which goods and services are produced is called a _____. A. planned economy B. command economy C. closed economy D. market economy

D. market economy

The majority of cross-border investment in the developed world is in the form of _____. A. hostile takeovers B. greenfield investments C. competitive investments D. mergers and acquisitions

D. mergers and acquisitions

In a _____ economy, certain sectors of the economy are left to private ownership and free market mechanisms while other sectors have significant state ownership and government planning. A. market B. private C. command D. mixed

D. mixed

Interdependent political, economic, and legal systems of a country make up its: A. administrative agenda. B. socioeconomic fabric. C. cultural environment. D. political economy.

D. political economy.

An aspect of _____ is the tendency to aggressively court FDI believed to be in the national interest by, for example, offering subsidies to foreign MNEs in the form of tax breaks or grants. A. the radical view B. the noninterventionist principle C. the free market view D. pragmatic nationalism

D. pragmatic nationalism

A common hybrid of a quota and a tariff is known as a(n): A. import tariff quota. B. voluntary export restraint. C. ad valorem tariff. D. tariff rate quota.

D. tariff rate quota.

A push strategy is appropriate when: A. there are many choices of electronic media. B. the firm is selling consumer goods. C. distribution channels are long. D. the firm is selling complex new products.

D. the firm is selling complex new products.

The _____ tends to be adopted by firms with a low level of diversification whose domestic structures are based on functions. A. global matrix structure B. worldwide product division structure C. performance structure D. worldwide area structure

D. worldwide area structure

The shift toward a more integrated and interdependent world economy is referred to as _____. A. outsourcing B. international marketing C. privatization D. globalization

D. globalization